Will the EU stop me buying shares?

Many readers complain that the financial institutions that are keen to take
their money are less willing to answer legitimate questions. Sometimes the
power of the press, in the shape of Jessica Gorst-Williams, can help

Some in the investment industry fear that the EU will ban execution-only share dealingPhoto: Alamy

For some years I have had an "execution-only" contract with a large firm of London stockbrokers. I manage my own portfolio, which is worth about £450,000. I do not change investments often, preferring to reinvest dividends in a few well-chosen holdings hopefully to build up savings for my grandchildren. I am a widower, aged 74.

I have heard recently that execution-only contracts are to be outlawed courtesy of the European Commission and the Financial Services Authority. Recently I received the enclosed letter from my brokers. I do not wish to hand over discretionary management as I would never know where I was and my parents lost a fortune through entering into this kind of arrangement.

I like to know when my dividends can be expected and budget accordingly.

CRKent

You want to continue dealing on an execution-only basis without advice. However, the firm you have been happy using but whose business is largely investment advice and managing didn't want to provide the execution-only service to you any more.

Some of its concerns purportedly surrounded a consultation paper the European Commission published at the end of last year concerning the tightening up of Markets in Financial Instruments Directive (MiFID).

These proposals consider a ban on execution-only trading but the view of those I canvassed in the industry seems to be that it will not be as radical as that. Nothing has been decided as yet.

Peter Hargreaves of Hargreaves Lansdown, which provides execution-only services as well as asset management, does not believe anything radical will occur to stop straightforward deals being done on an execution-only basis.

He is very confident that this type of dealing will not be banned. He explained that the commission has been nervous about certain types of investments including some futures, derivatives, very highly geared securities and some, or all, of these may come in for more stringent regulation.

There may be more questions asked as to whether an investor undertaking such deals knows what they are doing. He does not feel the industry would be able to continue if everyone was obliged to take advice before buying and then before selling.

T D Waterhouse, the broker which has business around Europe and is part of a global Canadian bank, says "As part of the EU's consultation into MiFID there has been a suggestion that the execution-only exemption should be removed so all customers have to undertake an appropriateness test whenever they want to open an account or take up a new type of product – irrespective of the instrument they want to trade.

"This is already required for some complex products such as covered warrants, and we recognise that the key aim of the review is for there to be greater definition as to what constitutes a complex product. This is something we welcome as there is a lack of clarity as to what defines a complex or non-complex product.

"T D Waterhouse will continue its participation in the consultation and will watch with interest for any further developments."

Peter Yandle, head of corporate communications at Fidelity International, said this was about people understanding what they are buying. The desire behind the review was that products bought on an execution-only basis were sufficiently transparent for them to be understood. He said: "We welcome anything that clarifies what people are buying and advocate more disclosure. There may be some form of self-certification for evidence that buyers do understand what it is they are buying.

"We don't know at present what the end point will be. More is likely to become clear about MiFID II in July at the earliest. However, as the motivation is right there shouldn't be too much to worry about."

The FSA sees this as unnecessary legislation which would add a cost to the consumer in that advice would have to be taken where it doesn't need to be now.

When I came back to you, you had found the service you were after via Lloyds Banking Group and were moving your account there.

Postdated cheque pain

Having been a loyal customer of Barclays Bank for more than 44 years, I wrote a postdated cheque as a holding deposit for some double-glazing units. Over two weeks before the cheque was due to be paid, I received a letter informing me that I was £2,500 overdrawn, this being the amount of the cheque.

It was just before payday so there was no money in that account. I told the bank the cheque was postdated and was told in return: "You may not write out such cheques."

The bank proceeded to heap charges on my account, also returning some of my direct debits and standing orders, charging me a fee for that also. It condescendingly extended my overdraft facility to £2,500 and then charged me for that as well.

I am so disgusted with this treatment that I have decided to move my accounts.

Is there anything you can do to help me and indeed anyone else who is unaware that you can no longer write postdated cheques and maybe save others the trouble this has caused me?

CF West Sussex

You tried to persuade the bank to take a compassionate stance given your long relationship with it. My approaches on your behalf also left it totally unmoved.

The bank quotes Section 4.23 of the terms and conditions. This states, "You must complete cheques so that they are not easy to alter and you must not put a date on your cheques which is after the date of signature. If you do, we will not be liable for any loss to you as a result of us paying a cheque before the date you have put on it."

With such a high volume of cheques going through the clearing system, policing postdated cheques is simply not practical. There is also another element in the equation whereby cheques may be presented months after issue so they may have been forgotten about and then not have sufficient funds to honour them.

Retailers too may find it tiresome to be expected to keep a diary note of when a cheque can be banked. The motive in cashing yours at once though sounds like eagerness to get the money as soon as possible. This being in reality how businesses tend to operate.

The Payments Council, which represents banks said: "There are no hard and fast rules about postdated cheques. It is pretty much most banks' policy to reject them. It is therefore best never to write one."

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